Tuesday, February 6, 2024

Netflix has reported a substantial increase in profits. Can we expect lower subscription prices?

“It is becoming increasingly clear that Netflix has won the ‘streaming wars,"
- Bank of America media analyst Jessica Reif Ehrlich, as quoted in a January 2024 Reuters story 

In recent years, the dominance of Netflix has been challenged by several other streaming companies such as Amazon Prime, Hulu and Disney+.  Not too long ago, the world's largest streamer was concerned about losing subscribers.  In 2019, Forbes even published an article entitled "All The Reasons Why Netflix Is Doomed."  The article described Netflix as being in the "Danger Zone".. 

My, how things have changed!  Netflix seems to be regaining popularity.  As of the fourth quarter of 2023, the giant streaming service had about 260 million subscribers worldwide.  This was an increase of more than 13 million subscribers as compared to the previous quarter.  Furthermore, in the fourth quarter of 2023, the company reported a net income of $937.8 million or $2.11 per share, a significant increase from the $55.3 million or 12 cents per share posted for the same period in 2022.  Netflix's revenue for the fourth quarter of 2023 was $8.83 billion, up from $7.85 billion in the fourth quarter a year previously.

Netflix's strong showing was fueled by a strong slate of shows, including the final season of the royal drama The Crown, as well as David Fincher's original film, The Killer.  Since Netflix is obviously doing well financially, will subscribers benefit from the company's increased revenue?  Will subscription costs decrease?  All I can say is don't expect lower subscription prices any time soon.

Netflix is planning to eliminate its Basic zero-ad plan, the company's cheapest ad-free plan.  The Basic plan, which is priced at $9.99 per month, is already being phased out.  New subscribers, as well as existing subscribers, have not been allowed to choose the Basic plan since 2023.  The Basic plan will be "retired" in  Canada and the United Kingdom beginning in April of 2024. 

Back in June of 2023, when Netflix announced that it was cutting off its lowest priced ad-free plan to new clients, the company informed The Canadian Press that those customers would have a choice between a cheaper $5.99 per month plan that includes advertisements, or one of its advertisement-free plans, which start at $16.49 per month.  I

n a letter to shareholders in its 2023 fourth quarter report, Netflix justified the changes in its plans.

"We seek to provide a range of prices and plans to meet a wide range of needs, including competitive starting prices," the letter reads.  "As we invest in and and improve Netflix, we'll occasionally ask our members to pay a little extra to reflect these improvements, which in turn helps drive the positive flywheel of additional investment to further improve and grow our service."

Unfortunately, streaming services are becoming more expensive.  Those higher prices seem here to stay. Will customers continue to stick with Netflix, or will they be able to find less expensive alternatives?

- Joanne

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